Social Security is safe in a federal shutdown

Federal shutdown: Social Security checks won't stopHarry Reid and President Obama say a government shutdown would impact Social Security benefits. Experts disagree. By Charles Riley, staff reporter


NEW YORK (CNNMoney) -- What happens to Social Security if the government shuts down?

"People don't get their Social Security checks." That was President Obama at a press conference last week.

And this is Harry Reid, the top Democrat in the Senate, in a statement on Tuesday: "A shutdown could ... mean no Social Security checks for seniors."

The Democrats are saber rattling, hoping to portray Republicans as irresponsible. And the claim has been repeated by other top Democrats.

Here's the rub: It doesn't appear to be true.

During the last major shutdown, which lasted about a month starting in late 1995, the Social Security Administration mailed checks throughout the crisis, and a close reading of established law makes clear the agency has the legal authority to do so again.

"I am absolutely sure the checks would be sent out," said John F. Cooney, a partner at law firm Venable who designed shutdown plans for the government while employed at the Office of Management and Budget.

Robert Reischauer, president of the Urban Institute and a trustee of the Social Security and Medicare trust funds, backed that view, saying claims that benefits won't be paid are "not true."

The legal case is pretty clear. In 1995, President Clinton's lawyers in the Department of Justice laid out how federal agencies should operate if Congress failed to appropriate funds.

At the time, Clinton's lawyers pointed out that Social Security checks could be mailed during a shutdown, because the program doesn't need Congress to authorize funds for it each year. Instead, Social Security benefits are paid from the program's trust fund.

"The shutdown refers to discretionary spending, and Social Security is mandatory spending. It doesn't need an appropriations bill to go forward," Reischauer said.

And because Social Security benefits -- which go to roughly 60 million Americans -- are paid out of the trust fund, the agency has the implied legal authority to keep paying staffers who administer them.

That's exactly what happened in 1995-1996. While some Social Security Administration employees were sent home, the agency's official written history notes that essential staff stayed on to make sure benefits were paid.

"The majority of the employees retained were in direct service positions to ensure the continuance of benefits to currently enrolled Social Security," the document reads.

According to Cooney, that legal interpretation has been supported by both Republican and Democratic administrations.

The White House, Majority Leader Reid and the Office of Management and Budget did not respond when asked by CNNMoney for clarification.

What does happen in a shutdown

To be sure, a government shutdown would have severe consequences. In 1995-1996, the government closed 368 National Park Service sites, along with national museums and monuments, and cleanup at toxic waste sites stopped, according to the Congressional Research Service.

Each government agency is required to produce a plan that it would implement in the event of a shutdown and to file it with the Office of Management and Budget.

OMB declined to make those plans available to CNNMoney, but it is likely the Social Security Administration's plan would result in a sizeable number of non-essential employees staying home.

But even once a shutdown goes into effect, agencies have some room to maneuver.

During the Clinton-era shutdown, new Social Security claims weren't being processed because the agency furloughed 61,415 employees. As the shutdown wore on, the agency adjusted its plan and recalled workers to start processing new claims.

The good news, if you can call it that, is that Congress has come down to the wire many times before and has usually managed to pass a funding bill.

But with Congress in recess this week, lawmakers will have only four working days to pass a spending bill before the current temporary measure expires.

The starting point for negotiations is a bill approved by the House just before dawn on Saturday that would cut $60 billion in federal spending for the current fiscal year.

But that bill would set spending below levels acceptable to Democrats. President Obama said last week he would veto the House measure should it reach his desk.

On Tuesday, OMB said it is prepared for "any contingency" and so are all agencies, but that a shutdown is unlikely.

"All of this is besides the point since, as the congressional leadership has said on a number of occasions and as the president has made clear, no one anticipates or wants a government shutdown," Kenneth Baer, OMB communications director, said in a statement.

The outcome of this standoff remains to be seen. While the last major shutdown happened 15 years ago, that impasse resulted from a Democratic president bumping heads with a willful Republican-controlled House that wanted to lower spending.

That episode is generally considered a major political victory for Clinton, and a defeat for Republicans who were viewed by the public as obstructionist. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.